A sinking fund is money you set aside a bit at a time for something you already know is coming.
That is the whole idea. Christmas is not an emergency. Neither is the car registration, the vet visit, or the fact that your tires will need replacing at some point. These are all completely predictable, and yet they are what wreck most monthly budgets, because a budget built only around this month has nowhere to put a bill that arrives once a year.
A sinking fund fixes that by turning an annual number into a monthly one. Below: what they are, how they differ from an emergency fund, thirty categories to choose from, and how to actually track them without a spreadsheet.
Sinking fund vs emergency fund
People mix these up constantly, and it matters, because they behave differently.
| Sinking fund | Emergency fund | |
|---|---|---|
| For | Something you know is coming | Something you did not see coming |
| Timing | Known, or roughly known | Unknown |
| Spending it | Expected. That is the point. | A last resort |
| Balance | Goes up, gets spent, starts again | Stays put and grows |
| How many | Several, one per goal | One |
Both, ideally. The emergency fund is the floor. The sinking funds are what stop you having to stand on it every November.
30 sinking fund categories
Not a list to copy wholesale. Pick the six or eight that describe your actual year.
The ones almost everyone needs
- Christmas and holiday gifts
- Birthdays
- Car maintenance and tires
- Car registration and inspection
- Insurance premiums paid annually or twice a year
- Medical and dental, including the deductible
- Home repairs
- Travel
Home
- Property taxes, if they are not in your escrow
- HOA dues
- Appliance replacement
- Furniture
- Yard and garden
- Hurricane and storm prep, if you live somewhere that needs it
- Pest control
Family and life
- School fees, supplies and uniforms
- Extracurriculars and sports seasons
- Childcare gaps over the summer
- Pets, including the annual vet visit
- Weddings, showers and graduations you will be invited to
- Family visits and flights home
The ones people forget until it is too late
- Annual subscriptions that renew in one hit
- Phone or laptop replacement
- Professional licenses, dues and certifications
- Tax bill, if you are self-employed or usually owe
- Clothing, especially children who grow out of everything at once
- Haircuts and personal care
- Car replacement, so the next one is not entirely financed
- A buffer for the categories you have not thought of yet
- Fun money that is not guilt money
Working out how much goes in each one
Two numbers and one division.
- What will it cost? Use last year's real figure if you have it, and round up rather than down.
- When do you need it? Count the months from now until then.
- Divide.
Christmas at $600 with ten months to go is $60 a month. Car registration at $250 due in five months is $50 a month. Tires at $800 that you will need "sometime next year" is about $67 a month, and that is the category people always underfund because there is no date forcing the issue.
Add the monthly figures up. If the total is more than you have, you do not have a tracking problem — you have too many funds. Cut the list, not the amounts, because a fund that is underfunded by half is a fund that will not be there when the bill lands.
How to track them
The mechanics matter less than picking one and sticking with it.
One account, several trackers
The simplest setup and the one most people end up at. All the sinking money sits in one savings account, and a sheet tells you how much of that balance belongs to which fund. The bank sees one number; you see eight.
Separate accounts or buckets
Cleaner, and impossible to accidentally spend across. Only workable if your bank does sub-accounts or savings goals without charging you for each one. Check before you open eight accounts.
Cash
Best for the small, frequent categories — gifts, haircuts, fun money. Bad for anything over a few hundred dollars sitting in a drawer for a year.
A printed tracker
One sheet per fund: the target at the top, a row per deposit, a running balance down the side. It is slower than an app, and that is exactly why it works — writing the number down is what makes you notice the month you skipped.
A printable sinking fund tracker
One of these per fund. Print it, write the goal at the top, and fill a row every time you move money in.
| Fund | ||
|---|---|---|
| Goal amount | Needed by | |
| Date | Amount in | Running total |
How many is too many
Six to eight is the range where most people stay consistent. Below four you are probably leaving something predictable uncovered. Above ten, funding all of them properly starts to take more money than you have, and the usual outcome is that every fund ends up at about 40% of target, which helps with nothing.
If you are starting today, take three: the next big known bill, Christmas, and car maintenance. Add more once those three have run a full cycle.
If you want it laminated instead of reprinted
The trouble with a printed tracker is that you reprint it every time a fund resets, and Christmas resets every year. A laminated card fixes that: fill it in with a wet-erase marker, wipe it when the fund is spent, start again.
Our A6 Sinking Funds Tracker set is eight of them, one per fund, sized for a standard A6 budget binder. Everything else that fits the same binder is in A6 budget binder inserts.